Reserve Bank offloads Securency stake

The Reserve Bank has agreed to sell its 50 per cent stake in banknote firm Securency to its joint venture partner, Innovia Films.

Securency has faced allegations of bribing foreign officials in south-east Asia in order to try and win banknote contracts.

After those allegations emerged, the RBA started a sale process for its stake in Securency in late 2010.

The bank says its sale of its stake is "in accordance with the bank's long-standing intention to exit from the joint venture once Securency had established itself as a viable long-term supplier in the international market for banknote substrate."

Subsequent to the sales process starting, the RBA says Innovia advised that it no longer wanted to sell its 50 per cent stake in the company, and instead made an offer to buy the bank's shares in a manner consistent with the joint venture agreement.

The RBA says it will receive around $65 million for its share of Securency, which is $11 million higher than the value it had given its stake in the company in last financial year's accounts.

The Reserve Bank says it may receive extra payments over the coming years, including if Securency exceeds certain earnings benchmarks.

Note Printing Australia (NPA), which prints Australia's banknotes, will remain a wholly-owned subsidiary of the RBA, and will enter into a long-term agreement with Securency to buy the polymer substrate on which Australia's notes are printed.

The Reserve Bank has faced accusations that it did not do enough to supervise Securency and NPA, nor to investigate the allegations of bribery at its subsidiaries or refer them promptly to appropriate authorities.

The bank has released a review commissioned by it and conducted by consultancy firm Cameron Ralph which has found that its supervision was appropriate.

"The bank gave reasonable consideration as to the governance arrangements for the two companies, and put in place processes for their oversight and reporting which were broadly consistent with usual practice at the time," the report concluded.

"The bank appointed people whom it was entitled to believe could direct the affairs of the companies with due care, diligence and skill."

However, the RBA commissioned report also acknowledges that the subsidiaries could have been scrutinised more closely.

"Clearly, with the benefit of hindsight, there could have been more oversight applied to the activities of the companies, which may have detected earlier the alleged illegal payments. But that does not mean that the bank's oversight at the time was inappropriate," the report added.